Apr 22, 2024 3 min read

Moving BBC radio to an ad-funded model would be a disaster, says Radiocentre

As the UK government reviews the future of BBC funding - and following the news that the BBC will start selling ads alongside its podcasts on third party platforms - Radiocentre has investigated what would happen if all of the BBC’s radio services were paid for by advertising

Moving BBC radio to an ad-funded model would be a disaster, says Radiocentre

UK commercial radio trade group Radiocentre has published a study which, it says, demonstrates that if the BBC was to try to fund its radio stations through advertising, it would end up being disastrous for both the BBC and commercial broadcasters. 

Indeed, only Radio 2 and 6 Music would break even under an advertising model, meaning other national stations would have to slash their budgets while local stations would have to close. Meanwhile, commercial radio broadcasters would lose a third of their revenues. 

“This study demonstrates that introducing advertising on BBC radio and audio services is a dangerous road to go down and will ultimately be bad for everyone”, says Radiocentre CEO Matt Payton. “It would have a devastating effect on the BBC and commercial radio, as well as a huge impact for audiences, with the disappearance of public service radio as we know it and less choice available in future”. 

Radiocentre commissioned consultancy firm Compass Lexecon to investigate what an ad-funded BBC radio operation might look like as the government begins a review of how the BBC should be funded in the future. The study's publication also follows the recent news that the BBC - via its commercial division BBC Studios - plans to start selling ads to go alongside some of its podcasts when they are accessed via third party platforms like Apple and Spotify. 

Commercial media companies are often jealous of the significant and relatively steady funding that the BBC receives via the licence fee. Lobbying from some of those companies has added to the political pressure put onto BBC bosses to become less reliant on the licence fee, by both cutting costs and finding other revenue streams. 

With Conservative governments generally more critical of the BBC, in recent years the licence fee was frozen, meaning the broadcaster got less money each year in real terms, once inflation is taken into account. Some Conservative politicians want the licence fee to be phased out entirely - and even BBC supporters acknowledge that the licence fee funding model probably needs to change as the way consumers engage with broadcast media evolves. 

All that said, while often critical of the BBC and its funding, at the same time commercial media companies don't actually want the BBC to start generating income by selling advertising and sponsorship. Because that would result in a big new competitor entering the advertising marketplace with some big brands and a massive archive of content.

Or at least it would in the short-term. The point of the Radiocentre study is that, given the costs of running the BBC's radio stations and the likely advertising income they could generate, many of those services would quickly become unviable.  

According to the number crunching done by Compass Lexecon, only Radio 2 and 6 Music could expect to break even if entirely funded by ads. Radio 1 would have to cut its overheads by 25%, Radio 4 would have to cut its costs in half, and the BBC's local radio stations would almost certainly have to close down entirely. 

Meanwhile, says the study, the financial impact for UK commercial radio would be “devastating” as advertisers diverted budgets to BBC stations. 

The sector's revenues would fall by 36%, which would “force many stations to close, while specialist and niche services would find it even harder to survive, therefore narrowing choice for audiences, with an inevitable knock-on effect on employment”. 

It seems very unlikely that a future BBC would ever be entirely ad-funded. However, with fears that the announcement around podcast ads could result in the BBC looking for other ways to expand its ad sales business, Radiocentre insists “even partial advertising would have a significant negative impact. These findings are stark, and we hope that both the government and the BBC will take them into account”. 

As well as the big review into BBC funding, the podcast ads plan is also subject to regulatory assessment. Many commercial podcast producers will be hoping the plan is blocked, although BBC bosses will presumably ask how they are meant to become less reliant on the licence fee if other revenue options are closed off.

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